EUR/USD Mid-Session Technical Analysis for May 31, 2019

The Euro is trading higher against the U.S. Dollar on Friday as fear of a recession and a Fed rate cut later this year weaken the greenback. Another plunge in U.S. Treasury yields is sending a strong message to the Fed to cut rates. So far the Fed has remained quiet since it is data dependent. It knows that trade disputes and tariffs aren’t good for the economy, but it’s not likely to act until it sees their effects on the labor market and inflation.

At 09:58 GMT, the EUR/USD is trading 1.1148, up 0.0018 or +0.17%.

On Thursday, a report from the Commerce Department showed that U.S. inflation was much weaker than initially thought in the first quarter amid a sharp slowdown in domestic demand. On Friday, traders will get the opportunity to react to the April Core PCE Index. The report is expected to come in at 0.2%.

In March 2018, inflation hit the Fed’s 2% target for the first time since April 2012. Friday’s report may show that inflation is now at 1.5% on a year-over-year basis. Hitting this number will give the Fed more ammunition to possibly cut rates and that is potentially bullish for the Euro.

From a technical perspective, the EUR/USD could surge to the upside if buyers can take out 1.1215.

Daily Technical Analysis

The main trend is down according to the daily swing chart. However, momentum has been trending higher since the formation of the closing price reversal bottom at 1.1107 on May 23. Evidence is also mounting that a secondary higher bottom may be forming at 1.1115.

A trade through 1.1107 will negate the closing price reversal bottom and signal a resumption of the downtrend. The main trend will change to up on a trade through 1.1215.

The minor range is 1.1107 to 1.1215. Its 50% level or pivot at 1.1161 is controlling the short-term direction of the EUR/USD.

The main range is 1.1264 to 1.1107. Its retracement zone at 1.1185 to 1.1204 is the primary upside target.

A long-term Fibonacci level comes in at 1.1185. Overtaking this level could change investor sentiment to up.

Daily Technical Forecast

Based on the early price action, the direction of the EUR/USD the rest of the session is likely to be determined by trader reaction to the uptrending Gann angle at 1.1137 and the downtrending Gann angle at 1.1135.

Bullish Scenario

A sustained move over 1.1137 will indicate the presence of buyers. If this creates enough upside momentum then look for the rally to extend into the pivot at 1.1161. Taking out this level will likely lead to a test of a pair of Gann angles at 1.1167 and 1.1175.

Taking out 1.1175 will indicate the buying is getting stronger. This could trigger a further rally into 1.1185. Buying is likely to increase if this level is taken out.

Bearish Scenario

The inability to sustain a rally over 1.1161 will indicate the return of sellers. Crossing to the weak side of the angle at 1.1135 will likely lead to a test of another uptrending Gann angle at 1.1122. This is the last potential support angle before the 1.1115 minor bottom and the 1.1107 main bottom.

Longer-Term View

If buyers can establish a support base over 1.1107 then I can build a case for a rally. Overcoming 1.1161 will be the first task. The next is crossing to the strong side of 1.1185. The third is a breakout over 1.1215.